Four Regional Fed Boards Pushed for Rate Hike Before July Policy Pause

Directors at four Federal Reserve regional banks voted to raise the primary credit rate just days before the central bank’s July policy meeting, according to discount rate minutes released Tuesday, underscoring deep divisions within the Fed heading into the decision.

The Cleveland and Minneapolis boards voted on July 16, followed by Kansas City and Dallas on July 23, to lift the primary credit rate to 4% from 3.75%. The Board of Governors declined to act on those recommendations, opting to hold the rate steady at 3.75%.

During the July 28–29 joint meeting of the Board and the Federal Open Market Committee, policymakers voted to maintain the federal funds target range at 3.5% to 3.75%. Three FOMC members dissented, Reuters reported. While regional directors do not vote on the federal funds rate or hold FOMC seats, they meet regularly with reserve bank presidents, whose policy views are shaped by those discussions.

Notably, Kansas City Fed President Jeffrey Schmid did not hold an FOMC voting seat this year, meaning his bank’s directors advocated for a hike at a meeting where he could not register a formal dissent.

At the Board’s July 20 meeting, held a week before the FOMC gathering, directors at ten reserve banks voted to maintain the current primary credit rate. Only Cleveland and Minneapolis had supported an increase at that stage, and the Board similarly declined to act on those proposals.

The three dissenters favoring a rate increase were Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan. All three argued the Fed needed to act decisively to return inflation to its 2% target. Chair Kevin Warsh, siding with the majority, insisted the central bank remained committed to its inflation goal but warned that elevated price pressures could not be resolved quickly.

The Board’s decision to hold rates steady on July 29 was unanimous. Supporting the action were Chair Kevin Warsh, Vice Chair Philip Jefferson, Vice Chair for Supervision Michelle Bowman, and Governors Christopher Waller, Lisa Cook, Michael Barr, and Jerome Powell.

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